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Have the City and State Shortchanged the M.T.A.?

By Sewell Chan August 14, 2008 11:03 amAugust 14, 2008 11:03 am

Updated, 5:20 p.m. | State and city subsidies to the Metropolitan Transportation Authority have remained largely flat since 1990, exacerbating the authority’s fiscal pressures at a time when it is threatening to raise fares and facing steep deficits because of the turbulence in the real estate market, according to a new report.

The three-page report [pdf], released by the city’s Independent Budget Office on Thursday, did not make any policy recommendations, but it suggested that the intense news coverage of the authority’s troubled finances has largely overlooked the issue of government subsidies. The authority collects far more revenue from subway, bus and commuter rail fares, dedicated taxes, and bridge and tunnel tolls than it draws from direct government aid.

“It remains to be decided whether new types of subsidies are necessary, or whether existing levels should be altered by adjusting terms that have held some subsides flat for a decade,” the report’s authors, Alan Treffeisen and Doug Turetsky, wrote. “But in order to best decide how to aid the M.T.A. in the future, a common understanding of how much assistance the city and state provide today is needed.”

Also on Thursday, Mayor Michael R. Bloomberg called on the state to increase subsidies for the authority. He also suggested that the city could do a better job of running the agency than the state. “Generally speaking, given the quality of mayors, they should be in control of their transportation systems,” Mr. Bloomberg said at a meeting of the United States Conference of Mayors in Midtown Manhattan.

Mr. Bloomberg said that when he ran for office the first time in 2001, he promised to try and wrest control of the city’s transportation system if he was elected. The events of Sept. 11, 2001, however, changed the economics, he said. “I didn’t recognize the desire in Albany to keep control,” he said.

Given the city’s own financial problems, taking control of the agency could be perilous. Asked if the city would increase subsidies to the authority, Mr. Bloomberg replied, “We have no money to do that, and it’s up to the state to find the money.”

Just teasing out how much the state and city give the authority can be tricky. The report notes that Mayor Michael R. Bloomberg has said the city gave $1.2 billion to the authority in the 2008 fiscal year. In fact, the report said, the total of all city and state subsidies to the authority — including subsidies from Connecticut and from suburban counties where the authority’s commuter railroads run — was only $858 million that year.

Most of New York City’s contribution to the authority goes to New York City Transit, the arm of the authority that runs the subways and buses. Here is a partial breakdown:

$159 million in annual operating assistance, which has remained fairly constant since the mid-1990s.

$45 million in annual reimbursements, also matched by the state, to partly cover the cost of providing reduced-price or free rides to children traveling to and from school. The payment levels have been unchanged since 1995.

$43 million (in 2007) to help operate Access-a-Ride, the paratransit program for the disabled. The city’s payment covers about one-third of the program, and increases to the city’s contribution are capped at no more than 20 percent a year. Without the cap, the city would have paid nearly twice as much in 2007 as it did.

$14 million in annual reimbursement for the cost of providing half-fare discounts to the elderly.

About $4.5 million in annual subsidies to cover part of the costs of the M.T.A. Police, which patrols Grand Central Terminal and Pennsylvania Station and is an independent law enforcement agency. (Mr. Bloomberg has argued that the roughly $360 million it costs the city’s Police Department to police the subways each year should be considered aid to the authority.)

$260 million (in 2007) to help cover operations, lease payments and insurance costs for the M.T.A. Bus Company, which in 2006 completed the takeover of seven private bus companies.

$106 million in annual contributions to the authority’s capital budget. From 1987 through 1996, the annual capital contribution averaged well over $200 million. It fell to $106 million and then, in 2003, to $75 million, before being raised to the current level. (The mayor has argued that certain debt service payments should be counted as aid to the authority, but the budget office did not share this view.)

$78 million for the maintenance of Long Island Rail Road and Metro-North Railroad stations in New York City.

State aid to the authority is much simpler:

$191 million annually in direct operating assistance.

$45 million in annual reimbursements to partly cover the cost of providing reduced-price and free rides to students.

$20 million in 2007 in special assistance to commuter railroads, a program not likely to be continued.

The state provides no direct aid to the authority’s capital budget, but nearly half of the $3 billion bond act passed by state voters in 2005 is designated for the authority’s current capital program.

In addition, there are several dedicated tax streams that are dedicated to the authority.

A so-called “urban tax,” collected in the city and dedicated to the authority, includes portions of the real property transfer and mortgage recording taxes imposed on certain commercial property sales. In 2007, urban tax revenue totaled just over $883 million, with 90 percent going to New York City Transit, 6 percent to Access-A-Ride, and 4 percent to the M.T.A. Bus Company.

The state also levies taxes earmarked for the authority that are collected in the 12-county region in which the authority operates. The state taxes brought in about $2.9 billion in 2007, including revenues from sources such as the 0.375 percent portion of the sales tax, the petroleum business tax, and a state mortgage recording tax.

I have to laugh a the hypocrisy of state elected officials who complain about fare increases which are largely due to the borrowing they approved during the Pataki administration which shifted the MTA’s capital costs (stations, rolling stock, etc.) from the state and city and placed it largely on the backs of the farepayers.

How many people realize that the MTA now has to pay over $150 million each month because of the irresponsible borrowing which, like those now-famous subprime mortgages, began with low up-front payments? That way the increases didn’t kick in until after the 2002 election.

The real culprit is not the MTA; it’s the politicians who kick the can down the road for the next administration to worry about.Too bad this story is almost never told.

Ask Senate Majority Leader Dean Skelos why, as a member of the Capital Program Review Board, he approved the borrowing plan when the Citizen’s Budget Commission and virtually every other fiscal watchdog group, opposed the plan.

The MTA is a corrupt, ineffective, extortive, rotting hulk of a outdated Public Authority model that should have died from its own lack of competence years ago, maintaining itself on life support by draining funds from the public.

Yes, the real culprit is the MTA Mr Silverman. When the system can’t so much keep up with taking the trash out, or any basic measurement of quality maintenance, then it’s got to fix itself before it comes crying to the public for more funds to dump into the vast wasteful operations that it can’t even pretend to defend.

The MTA should be broken up and privatized, and citizens of the city should stop having to pay to be punished by an incompetent institution unanswerable to the public.

To raise capitol for the MTA why not sell station names to companies (Dubai is doing this for their new rapid transit lines) – 2nd ave would be Whole Foods, Broadway/Lafayette – Adidas, 59st (Lex line) – Bloomingdales, 59th Columbus circle – CNN plaza, 79th st (Broadway) – Zabars, 49-50th st – Time Life, 34th st – Macy’s – etc. and the compaines would also be resposible for station upkeep (read restrooms). Sure it is a sell out, but keep the fare at $2 or less for the people – who are going shopping anyway.

I wonder how much municipalities in the MTA service area pay, out of general tax revenues (not user fees), to support the local and arterial highway network. Do gasoline taxes cover all free road and bridge costs? Do they cover all the public safety costs of police patrols and crash assistance, and fire and ambulance services for crashes?

One failed privatization/deregulation – power generation. In California is caused rolling blackouts. Here, Con Ed still exists but it is in charge of only a piece of the process (transmission, I think) while the rest is farmed out to contractors. Now no one is investing in infrastructure the way we need to be because it’s not profitable enough and blackouts are the result.

Are you suggesting that privatizing the NYC transit system would mean any worse service than we currently endure?

Your point about California may be germane, but doesnt lend itself directly to any point as to why many other areas under control of municipal authorities couldnt be better managed by private interests. An undifferentiated generic interest like power generation doesnt compare well to the current quasi-independent status of the MTA. Whether privatized or not, in whole or in part, the breakup and rearrangement of the MTA would be a starting point for improving what has been, on the whole, a wreck that does a disservice to the citizens of this city.

Or do you *like* subsidizing the people who sit in the little glass boxes all day and do nothing?

What private company wants to own the MTA? Also, keep in mind the IRT and the BMT went bankrupt as eventually they couldn’t run their private subway companies profitably, so they SOLD their companies to the city of New York.

The system isn’t profitable, especially when you have to deal with upgrades, new rolling stock, new projects like the 2nd Avenue subway and LIRR to grand central. Around the world, it’s the norm for mass transit to be done by the GOVERNMENT.

But if you insist on relying on the private sector for transportation to and from work, your choice is simple. Buy a car, or WALK.

I found it to be the other way around. It is the MTA that has shortchanged the city and state. The answer is pretty much that they are already making a lot of revenue as they are right now, especially when the New York City MTA makes among the highest in average yet they act so poor. What happened to that surplus they recently had? My guess is that most of went to themselves. They would have wanted to raise the fares even if congestion pricing was never an issue or if that transit strike didn’t happen, becuase they would have done it just for the fun of it. The MTA shouldn’t be privatized, it should be reformed, and they should make transit efficiency a first priority, not a last one as they are doing right now.

We also subsidize capital project costs for “private” power companies and internet providers. Is that fair to the tax payer? The FCC, FERC, and Congress have spent billions of dollars on providing rural internet and power access to citizens, and in most cases, that money went to private companies. Why? Because the capital costs were to great for the private companies to see any incentive to provide the services, so the government stepped in.

Same with the MTA. The capital costs required to to maintain and expand track capacity are too great for a private company to have incentive to take the lines over completely, and therefore, would still need to be subsidized, unless they could come up with some sort of long term debt structure (which would included current debt by the MTA) that gets some powerhouse backing… Not likely to happen. Although, If it transit is no longer competing with driving.

So, privatization won’t work. It’s current designation as an “Authority” doesn’t work (authorities aren’t fully controlled by the government..), perhaps full government ownership might be in order? I’m not 100% comfortable with that myself… but is seems to me that the acknowledgment that the subway and transit systems in NYC will always be a money drain might get us towards some sensible solutions

The points about the MTA being inefficient, greedy and corrupt, while true, are not applicable with regards to this article. We all know that the MTA needs a good shakeup. For starters, it should be controlled by the city, because that is where the vast majority of riders begin or end their trips.

I would answer the question posed in the title in the affirmative. Stephen Andrus has pointed out that we don’t know what part of the total budget this is. I think nobody knows except a few high-ranking MTA officials- the ones cooking the books. But clearly, the budget is in the $10s of billions, so the subsidies are probably about 5-25% of the budget. Not very much at all, considering how low the fares are.

The first thing that jumped out at me is that the subsidies weren’t raised for over a decade. What’s completely scandalous is that they weren’t even adjusted for inflation. So of course the MTA can’t even keep the same level of service and maintenance; the money given to it actually shrinks, year by year!

Ever since Pataki, the state has treated the MTA as a “not in my backyard” problem. I bet that per capita we pay more to finance new roads to nowhere in upstate forests than upstaters pay for our subway. And that is unfair, ridiculous, environmentally-unfriendly, and just plain wrong.

MTA employees ride the public transportation system for which they work without paying any fee. MTA runs buses empty of riders, advertising, ironically, NOT IN SERVICE. MTA management expresses contempt for its riders, as shown, from countless examples, in its cursory conduct of fare-hike hearings and its placement of air conditioners to blast hot exhaust onto passengers entering the subway at Union Square or Chambers Street IND lines.

Now, why does the MTA need any more subsidy when it is a spendthrift with the funds it receives?

The total absence of will to resolve the problem on the part of all is appalling. Mayor Mike and Governor Dave both never saw a regressive tax they didn’t love. (Why did we get rid of the commuter tax? Chase, Charlie’s favorite bank makes loads of money from administering the system for billing retirees monthly, and from the machines now designed to allow you to use a bank card to pay per ride like the easy pass.
Theodore Kheel suggested in an editorial in the Sunday Times that if the expensive computer system which of course tracks every card – were done away with, fares might be done away with as well. Do we pay Viacom for handling the advertizing? It was probably cheaper to run the system with tokes and change. Why do school children need to have cards at all? So long as I pay so that drivers in the city can have free paved parking, it truly does not offend me if someone who might not have the money actually gets a free ride.

85 million dollars according to the MTA is the cost of the new W 96th Street Station. Why so much money? How many more exit signs we need?

There is so much that is simply useless– the little frames (who got that contract?) on the posts in the station, the printed brochures that tell you to take the train to this or that event– not the signs, little pamphlets, the 400 MTA lawyers — etc. but this is the way the MTA likes it. How much more money was everyone paid last year? What kind of bonuses? Who is in charge? and why so corruption?

An increased tax rate and a recalibration of the whole tax system (which is basically a flat tax system right now, might not please the 15% hedge funders but might be fair and what about reinstating the commuter tax??? Hello. Is anybody listening?

but is seems to me that the acknowledgment that the subway and transit systems in NYC will always be a money drain might get us towards some sensible solutions

Im glad there’s at least some discussion here about alternatives to the current system

I dont think privatization is the only solution, but I think people might be shortsighted about the potentials to split up lines and farm them out – reducing the capital requirements that everyone sees as so prohibitive.

Assuming that the system must fundamentally be a money-losing project seems to be starting with the goal of failure, and i dont think its an assumption that provides any room for innovative thinking about how to move forward.

I know the IRT and other private lines went belly up. I’m simply pointing out that we didnt get where we are on the back the largesse and entrepreneurial spirit of our benevolent government. I think all options other than the continued existence of the MTA should be on the table and debated on their merits.

The Germans have great escalators, we’ve been told here; maybe we should take a look at their financial example as well. What are their respective percentages of fare-based revenues and tax-based revenues, compared to ours? Are their transit systems financially stable, or do they go through the same sort of rigamarole we do every year?

What about other European countries? The mayor likes taking inspiration from abroad, what would he find if he looked into ways other countries handle mass transit? Especially those viewed as having excellent systems.

How could a private commuter railroad survive when it’s up against massive government subsidies for highways? This is why they went out of business right after the Interstates were built and why any talk of “privatization” is just a way to kill train service or make it available only for people willing to pay 10 times more than we’re paying now.

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